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The Empirical Content of Pay-for-Performance

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  • Canice Prendergast

Abstract

Empirical evidence on the effect of pay-for-performance on output has been scarce. We propose that worker responses to marginal pay-for-performance changes can be related to their response to a measure of taxes. Using this approach, we suggest a short-run elasticity of output with respect to incentive pay for high earners in the United States of 0.25 or lower, and it is difficult to rule out very low responsiveness. (JEL J33, H24)

Suggested Citation

  • Canice Prendergast, 2015. "The Empirical Content of Pay-for-Performance," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 31(2), pages 242-261.
    • Handle: RePEc:oup:jleorg:v:31:y:2015:i:2:p:242-261.
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    File URL: http://hdl.handle.net/10.1093/jleo/ewu014
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    References listed on IDEAS

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    Cited by:

    1. Timothy Besley & Hannes Mueller, 2018. "Predation, Protection, and Productivity: A Firm-Level Perspective," American Economic Journal: Macroeconomics, American Economic Association, vol. 10(2), pages 184-221, April.
    2. Cordella, Antonio & Cordella, Tito, 2017. "Motivations, monitoring technologies, and pay for performance," Journal of Economic Behavior & Organization, Elsevier, vol. 133(C), pages 236-255.
    3. Francisco Brahm & Joaquin Poblete, 2018. "Incentives and Ratcheting in a Multiproduct Firm: A Field Experiment," Management Science, INFORMS, vol. 64(10), pages 4552-4571, October.

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    More about this item

    JEL classification:

    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies

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